IPO Lock-Up

AAA

DEFINITION of 'IPO Lock-Up'

A contractual caveat referring to a period of time after a company has initially gone public, usually between 90 to 180 days. During these initial days of trading, company insiders or those holding majority stakes in the company are forbidden to sell any of their shares. Once the lock-up period ends, most trading restrictions are removed.

Also referred to as "lock-up period".

INVESTOPEDIA EXPLAINS 'IPO Lock-Up'

An IPO lock-up is done so that the market is not flooded with too much supply of a company's stock too quickly. Typically, only 20% of the outstanding shares are initially offered to the investing public. A single large shareholder trying to unload all of his holdings in the first week of trading could send the stock downward, to the detriment of all shareholders.

There is also empirical evidence suggesting that after the end of the lock-up period, stock prices experience a permanent drop of about 1-3%.

VIDEO

RELATED TERMS
  1. Red Herring

    A preliminary prospectus filed by a company with the Securities ...
  2. Forced Initial Public Offering ...

    An instance in which a company is forced into issuing shares ...
  3. Follow On Public Offer - FPO

    An issuing of shares to investors by a public company that is ...
  4. Pre-IPO Placement

    When a portion of an initial public offering (IPO) is placed ...
  5. Underwriting

    1. The process by which investment bankers raise investment capital ...
  6. Prospectus

    A formal legal document, which is required by and filed with ...
Related Articles
  1. Investing

    How can average investors get involved in an IPO?

    An initial public offering, or IPO, is the first sale of stock by a new company, usually a private company trying to go public. An IPO often serves as a way for companies to raise capital for ...
  2. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  3. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  4. Nearly all IPOs have some sort of lock-up period
    Investing Basics

    IPO Lock-Ups Stop Insider Selling

    Ownership plays a key role when companies go public. Find out how.
  5. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  6. Investing Basics

    How Does Alibaba Make Money? A Simple Guide

    Alibaba broke IPO headlines--but making news and making money are two different things.
  7. You may owe money, but you still have rights. There's a long list of things debt collectors are banned from doing to you. Know what's illegal.
    Credit & Loans

    5 Things Debt Collectors Can't Do To You

    You may owe money, but you still have rights. There's a long list of things debt collectors are banned from doing to you. Know what's illegal.
  8. Sounds like a bad horror movie, but it really could happen to you. Here's how to identify zombie debt and send collectors back to the dead-debt graveyard.
    Credit & Loans

    How To Beat Off A Zombie Debt Collector

    Sounds like a bad horror movie, but it really could happen to you. Here's how to identify zombie debt and send collectors back to the dead-debt graveyard.
  9. Understanding how the debt collection business works will give you a better chance of coming out ahead if you ever have to tangle with a collection agent.
    Credit & Loans

    Inside Secrets Of The Debt Collection Business

    Understanding how the debt collection business works will give you a better chance of coming out ahead if you ever have to tangle with a collection agent.
  10. Investigate these expat havens if you seek a developed country with low barriers for getting a permanent resident visa – sometimes even citizenship.
    Personal Finance

    5 Developed Countries That Welcome Expats

    Investigate these expat havens if you seek a developed country with low barriers for getting a permanent resident visa – sometimes even citizenship.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center